McGraw-Hill/Irwin

9-1 Copyright © 2007 by The McGraw-Hill Companies, Inc. All

 Chapter
9
Decision Support Systems

Decision Support
MIS and DSS
Artificial Intelligence
Expert Systems

McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All

 Learning Objectives
1. Identify the changes taking place in the form
and use of decision support in business.
2. Identify the role and reporting alternatives of
management information systems.
3. Describe how online analytical processing
can meet key information needs of
managers.
4. Explain the decision support system concept
and how it differs from traditional
management information systems.
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 Learning Objectives
5. Explain how the following information
systems can support the information needs
of executives, managers, and business
professionals:
a. Executive information systems
b. Enterprise information portals
c. Knowledge management systems

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 Learning Objectives
5. Identify how neural networks, fuzzy logic,
genetic algorithms, virtual reality, and
intelligent agents can be used in business.
6. Give examples of several ways expert
systems can be used in business decision-
making situations.

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 Case 1: Centralized Business
Intelligence at Work
Starting each business-intelligence project from scratch
leads to
Reinventing the wheel
High development and support costs
Incompatible systems
Some companies are standardizing on fewer business-
intelligence tools and making them available throughout
the organization and
Business-intelligence competency centers

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 Case Study Questions
1. What is business intelligence? Why are
business intelligence systems such a popular
business application of IT?
2. What is the business value of the various BI
applications discussed in the case?
3. Is a business-intelligence system an MIS or a
DSS?

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 Real World Internet Activity
1. Companies are taking advantage of the competitive
edge they enjoy from high-quality business
intelligence. To meet the demand for applications to
support the process, vendors are developing a wide
variety of offerings. Using the Internet,
 See if you can find several examples of software
products to support the management of business
intelligence.
 Do they all take the same approach, or are there
different ways of managing the process?

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 Real World Group Activity
Business intelligence competency centers can
be quite costly to start and maintain. There
prevalence, however, suggests the benefits
are worth the costs. In small groups,
Discuss the various skills and job roles necessary
for a competitive business intelligence
competency center.
Can such centers be considered competitive
advantage or simply competitive necessity?

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 Information required at different
management levels

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 Levels of Management
Decision Making
Strategic management
Executives develop organizational goals, strategies,
policies, and objectives
As part of a strategic planning process
Tactical management
Managers and business professionals in self-directed
teams
Develop short- and medium-range plans, schedules
and budgets
Specify the policies, procedures and business
objectives for their subunits

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 Levels of Management
Decision Making
Operational management
Managers or members of self-directed teams
Develop short-range plans such as weekly
production schedules

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 Information Quality
Information products whose characteristics,
attributes, or qualities make the information
more value
Information has 3 dimensions:
Time
Content
Form

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 Attributes of Information
Quality

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 Decision Structure
Structured – situations where the procedures
to follow when a decision is needed can be
specified in advance
Unstructured – decision situations where it is
not possible to specify in advance most of the
decision procedures to follow
Semistructured - decision procedures that can
be prespecified, but not enough to lead to a
definite recommended decision

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 Information Systems to support
decisions
Management Decision Support
Information Systems Systems

Decision Provide information about the Provide information and

support performance of the techniques to analyze
provided organization specific problems
Information Periodic, exception, demand, Interactive inquiries and
form and and push reports and responses
frequency responses
Information Prespecified, fixed format Ad hoc, flexible, and
format adaptable format
Information Information produced by Information produced by
processing extraction and manipulation analytical modeling of
methodology of business data business data

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 Decision Support Trends
Personalized proactive decision analytics
Web-Based applications
Decisions at lower levels of management and
by teams and individuals
Business intelligence applications

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 Business Intelligence Applications

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 Decision Support Systems
DSS
Provide interactive information support to
managers and business professionals during
the decision-making process
Use:
Analytical models
Specialized databases
A decision maker’s own insights and judgments
Interactive computer-based modeling
To support semistructured business decisions
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 DSS components

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 DSS Model base
Model base
A software component that consists of models
used in computational and analytical routines
that mathematically express relations among
variables
Examples:
Linear programming models,
Multiple regression forecasting models
Capital budgeting present value models

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 Management Information
Systems
MIS
Produces information products that support
many of the day-to-day decision-making needs
of managers and business professionals
Prespecified reports, displays and responses
Support more structured decisions

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 MIS Reporting Alternatives
Periodic Scheduled Reports
Prespecified format on a regular basis
Exception Reports
Reportsabout exceptional conditions
May be produced regularly or when exception
occurs
Demand Reports and Responses
Information available when demanded
Push Reporting
Information pushed to manager
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 Online Analytical Processing
OLAP
Enables mangers and analysts to examine and
manipulate large amounts of detailed and
consolidated data from many perspectives
Done interactively in real time with rapid
response

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 OLAP Analytical Operations
Consolidation
Aggregation of data
Drill-down
Display detail data that comprise consolidated
data
Slicing and Dicing
Ability
to look at the database from different
viewpoints

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 OLAP Technology

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 Geographic Information
Systems
GIS
DSS that uses geographic databases to construct
and display maps and other graphics displays
That support decisions affecting the geographic
distribution of people and other resources
Often used with Global Position Systems (GPS)
devices

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 Data Visualization Systems
DVS
DSS that represents complex data using
interactive three-dimensional graphical forms
such as charts, graphs, and maps
DVS tools help users to interactively sort,
subdivide, combine, and organize data while it is
in its graphical form.

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 Using DSS
What-if Analysis
End user makes changes to variables, or
relationships among variables, and observes the
resulting changes in the values of other
variables
Sensitivity Analysis
Value of only one variable is changed repeatedly
and the resulting changes in other variables are
observed

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 Using DSS
Goal-Seeking
Set a target value for a variable and then
repeatedly change other variables until the
target value is achieved
How can analysis
Optimization
Goal is to find the optimum value for one or
more target variables given certain constraints
One or more other variables are changed
repeatedly until the best values for the target
variables are discovered
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 Data Mining
Main purpose is to provide decision support to
managers and business professionals through
knowledge discovery
Analyzes vast store of historical business data
Tries to discover patterns, trends, and
correlations hidden in the data that can help a
company improve its business performance
Use regression, decision tree, neural network,
cluster analysis, or market basket analysis

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 Market Basket Analysis
One of most common data mining for
marketing
The purpose is to determine what products
customers purchase together with other
products

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 Executive Information
Systems
EIS
Combine many features of MIS and DSS
Provide top executives with immediate and easy
access to information
About the factors that are critical to
accomplishing an organization’s strategic
objectives (Critical success factors)
So popular, expanded to managers, analysts and
other knowledge workers

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 Features of an EIS
Information presented in forms tailored to the
preferences of the executives using the
system
Customizable graphical user interfaces
Exception reporting
Trend analysis
Drill down capability

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 Enterprise Interface Portals
EIP
Web-based interface
Integration of MIS, DSS, EIS, and other
technologies
Gives all intranet users and selected extranet
users access
To a variety of internal and external business
applications and services
Typicallytailored to the user giving them a
personalized digital dashboard

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 Enterprise Information Portal
Components

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 Knowledge Management
Systems
The use of information technology to help
gather, organize, and share business
knowledge within an organization

Enterprise Knowledge Portals

EIPs that are the entry to corporate intranets
that serve as knowledge management systems

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 Enterprise Knowledge Portals

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 Case 2 Artificial Intelligence
The Dawn of the Digital Brain
Numenta will translate the way the brain
works into an algorithm that can run on a new
type of computer
The human brain does not work like a
computer
Intelligence, according to Hawkins, is pattern
recognition

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 Case Study Questions
1. What is the business value of AI technologies
in business today? What value might exist if
Jeff Hawkins can build a machine to think like
humans?
2. Why has artificial intelligence become so
important to business?
3. Why do you think banks and other financial
institutions are leading users of AI
technologies? What are the benefits and
limitations of this technology?

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 Real World Internet Activity
1. The concept of human thought is still a mystery
despite the development of our understanding of the
fundamental processes of the human brain. For
many years, scientists have worked hard to develop
humanlike machines, but none have been able to
perform as well as the human brain when it comes to
reasoning. Using the Internet,
 See if you can find evidence of other projects similar to
that of Hawkins.
 What is the current state of the art in this area of
research and development?

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 Real World Group Activity
The case ends by asking the question of
whether we can ever build a machine more
intelligent than a human. The real question is
what will we do with it, or with us, if we are
successful. In small groups,
Brainstorm about a future with machines that
can equal or exceed the intelligence of humans.
What good would come of such an
accomplishment?
What potential risks might occur?

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 Artificial Intelligence (AI)
A field of science and technology based on
disciplines such as computer science, biology,
psychology, linguistics, mathematics, and
engineering
Goal is to develop computers that can
simulate the ability to think, as well as see,
hear, walk, talk, and feel

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 Attributes of Intelligent
Behavior
Think and reason
Use reason to solve problems
Learn or understand from experience
Acquire and apply knowledge
Exhibit creativity and imagination
Deal with complex or perplexing situations
Respond quickly and successfully to new
situations
Recognize the relative importance of elements in
a situation
Handle ambiguous, incomplete, or erroneous
information

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 Domains of Artificial
Intelligence

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 Cognitive Science
Based in biology, neurology, psychology, etc.
Focuses on researching how the human brain
works and how humans think and learn

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 Robotics
Based in AI, engineering and physiology
Robot machines with computer intelligence
and computer controlled, humanlike physical
capabilities

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 Natural Interfaces
Based in linguistics, psychology, computer science,
etc.
Includes natural language and speech recognition
Development of multisensory devices that use a
variety of body movements to operate computers
Virtual reality
 Usingmultisensory human-computer interfaces that
enable human users to experience computer-
simulated objects, spaces and “worlds” as if they
actually exist

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 Expert Systems
ES
A knowledge-based information system (KBIS)
that uses its knowledge about a specific,
complex application to act as an expert
consultant to end users

KBIS is a system that adds a knowledge base

to the other components on an IS

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 Expert System Components
Knowledge Base
 Facts about specific subject area
 Heuristics that express the reasoning procedures of
an expert (rules of thumb)
Software Resources
 Inference engine processes the knowledge and
makes inferences to make recommend course of
action
 User interface programs to communicate with end
user
 Explanation programs to explain the reasoning
process to end user
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 Expert System Components

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 Methods of Knowledge
Representation
Case-Based – knowledge organized in form of
cases
Cases: examples of past performance,
occurrences and experiences
Frame-Based – knowledge organized in a
hierarchy or network of frames
Frames: entities consisting of a complex
package of data values

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 Methods of Knowledge
Representation
Object-Based – knowledge organized in
network of objects
Objects: data elements and the methods or
processes that act on those data
Rule-Based – knowledge represented in rules
and statements of fact
Rules: statements that typically take the form of
a premise and a conclusion
Such as, If (condition) then (conclusion)

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 Expert System Benefits
Faster and more consistent than an expert
Can have the knowledge of several experts
Does not get tired or distracted by overwork or
stress
Helps preserve and reproduce the knowledge
of experts

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 Expert System Limitations
Limited focus
Inability to learn
Maintenance problems
Developmental costs
Can only solve specific types of problems in a
limited domain of knowledge

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 Suitability Criteria for Expert
Systems
Domain: subject area relatively small and limited to well-
defined area
Expertise: solutions require the efforts of an expert
Complexity: solution of the problem is a complex task
that requires logical inference processing (not possible in
conventional information processing)
Structure: solution process must be able to cope with ill-
structured, uncertain, missing and conflicting data
Availability: an expert exists who is articulate and
cooperative

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 Development Tool
Expert System Shell
Software package consisting of an expert system
without its knowledge base
Has inference engine and user interface
programs

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 Knowledge Engineer
A professional who works with experts to
capture the knowledge they possess
Builds the knowledge base using an iterative,
prototyping process

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 Neural Networks
Computing systems modeled after the brain’s
mesh-like network of interconnected
processing elements, called neurons
Interconnected processors operate in parallel
and interact with each other
Allows network to learn from data it processes

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 Fuzzy Logic
Method of reasoning that resembles human
reasoning
Allows for approximate values and inferences
and incomplete or ambiguous data instead of
relying only on crisp data
Uses terms such as “very high” rather than
precise measures

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 Genetic Algorithms
Software that uses
Darwinian (survival of the fittest), randomizing,
and other mathematical functions
To simulate an evolutionary process that can
yield increasingly better solutions to a problem

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 Virtual Reality (VR)
Computer-simulated reality
Relies on multisensory input/output devices
such as
a tracking headset with video goggles and
stereo earphones,
a data glove or jumpsuit with fiber-optic sensors
that track your body movements, and
a walker that monitors the movement of your
feet

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 Intelligent Agents
A software surrogate for an end user or a
process that fulfills a stated need or activity
Uses its built-in and learned knowledge base
To make decisions and accomplish tasks in a
way that fulfills the intentions of a user

Also called software robots or bots

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 User Interface Agents
Interface Tutors – observe user computer
operations, correct user mistakes, and provide
hints and advice on efficient software use
Presentation – show information in a variety of
forms and media based on user preferences
Network Navigation – discover paths to
information and provide ways to view
information based on user preferences
Role-Playing – play what-if games and other
roles to help users understand information and
make better decisions
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 Information Management
Agents
Search Agents – help users find files and
databases, search for desired information, and
suggest and find new types of information
products, media, and resources
Information Brokers – provide commercial
services to discover and develop information
resources that fit the business or personal
needs of a user
Information Filters – receive, find, filter,
discard, save, forward, and notify users about
products received or desired
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 Case 3: Robots are the common
denominator
Telerobotic-assistedmedical procedures
Flexible automobile body shop with wireless
inventory replenishment

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 Case Study Questions
1. What is the current and future business value
of robotics?
2. Would you be comfortable with a robot
performing surgery on you? Why or why not?
3. The robots being used by Ford Motor Co. are
contributing to a streamlining of their supply
chain. What other applications of robots can
you envision to improve supply chain
management beyond those described in the
case?

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 Real World Internet Activity
1. Applications for robots are being explored in
every possible setting. Using the Internet,
 See if you can find some examples where
robots have been used to improve a process,
reduce costs, or make the impossible possible.

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 Real World Group Activity
The previous case in the chapter described the
development of a machine that could think
just like humans. Combined with advanced
robotics, such a machine could conceivably
perform most actions as well, or possibly
better, than humans. In small groups,
Discuss how the combination of advanced AI and
robotics could be used to create business value.
What would we want such machines to be able
to do or not do?

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